Introduction
This report seeks to investigate and analyse the main characteristics of overbooking and the impacts this can have on a hotels management systems and customers. It examines the consequences of both successful and ineffective overbooking management decisions depending on the way in which it is managed and the effect this can have on the hotels profitability of the hotel. It also looks at the effect that overbooking has on customer behaviour and loyalty and legislations that have been passed in the USA. Existing research on yield management analyses’ overbooking and how this can be implemented effectively within hotels, some researchers have then expanded upon this to incorporate effects on profitability, customer service and service recovery. Secondary data was collect through journals, books, hospitality related magazines and hospitality news articles in order to gain framework for the research topic.
Literature Review
Companies throughout the hospitality industry a keen to implement the most successful techniques in order to make the best of their efficiency and increase their profitability and yield management, including overbooking strategies which is important in the operation of a hotel to maximise revenue and are increasingly putting these in to practise throughout the company (Hwang et al, 2009), an unoccupied room in a hotel offers a revenue opportunity, whether or not the no show customer has paid for it. Overbooking forms a part of a hotels yield management, also known as revenue management and can be defined as “the application of information systems and pricing strategies to allocate the right capacity to the accurate customers, cost and time” (Kimes et al, 2003: 30), by expanding on this term it ...
... middle of paper ...
...a donnybrook.”: Hotel Management Magazine, New York.
Noone, B. & Kimes, S. & Renaghan, L. (2003) “Integrating customer relationship management and revenue management: a hotel perspective”: Cornell University, Journal for Hospitality Research.
Simon, J. (1968) “An Almost Practical Solution to Airline Overbooking”: London, Journal of Transport Economics and Policy.
Sulistio, A. & Kyong, K. & Byya, R. (2008) “Managing cancelations and no-shows of reservations with overbooking to increase resource revenue”: Washington, CCGRID '08 Proceedings.
Talluri, K. & Van-Ryzin, G. (2004) “The Theory and Practice of Revenue Management”: New York, Springer
Todorov, A. & Zhechev, V. (2010) “The impact of overbooking on hotels’ operation management”: Unknown, Unknown.
Vickrey, W. (1972) “Airline Overbooking: Some Further Solutions”: Journal of Transportation and Economic Policy.
The competition in the hospitality industry is increasing. Hilton and Intercontinental Hotels are of same class, offering same quality services; this is making each hotel to face very high threats of substitute products. For model, in the absents of Hilton, Intercontinental will satisfy the customers’ needs perfectively and the same time, if Intercontinental is absent, Hilton will satisfy the needs of the customers perfectly.
This study will make inferences by content analysis in line with “Analyzing the Use of an Advance Booking Curve in Forecasting Hotel Reservations” “Hotel reservation methods--a discriminant analysis of practices in English Hotels” “A comparison of forecasting methods for hotel revenue Management”. As well company information from annual reports (2014 and 2015) will be analyzed with regard to occurred reservation system failures to conclude recommendation for how capacity utilization and demand management can be enhanced by updating current reservation system with better forecasting capabilities.
Apart from booking time, the stars of hotel also affect the booking decision of the customer for example a four to five star hotel will have higher price for the booking while 3 or 2 stars have lower booking price. Thus consumer knows the price, brand, its location etc. The customer can also have information any fluctuation in its prices therefore the customer rational about his booking; as the customer has full information about the market price, he can assess the available information and can make good decision regarding the online hotel booking. Her in the analytical formwork we will only discuss the customer behavior for price change. Initially the equilibrium of rational expectation was based on strong assumption in econometric model. However due the advancement in mathematics in late fifties and early sixties “General Equilibrium” model, it has been developed mathematically by Rander (1968, 1972), however he imposed so many restrictions. The analytical framework is based on Rander (1968, 1972) and it is the transformed form as it is applied
The sample represents all U.S. regions and several different hotel location types, including city (47.7%), suburb (15.2%), airport (15.2%), and resort (21.9%). The total data presented here are from hotel managers (N = 98) and hourly employees (N=66) who completed a baseline survey followed by daily diary telephone interviews for eight consecutive days.
Hilton Worldwide carries out business through three segments: (1) management and franchise; (2) ownership; and (3) time-share. These business segments enable management to capitalize on strengths like brand recognition and economies of scale. The company focuses primarily on the management and franchise segment which consist of 3,918 hotels with 610,413 rooms. Managing the properties, rather than owning them, allows the company t...
In order for revenue management to be successful, four fundamental conditions must be met. The first requires a permanent amount of supply available for sale. Meaning, a fixed amount of seats per aircraft should be available per route. Second, resources sold must be perishable. Seats are a perishable items, if not sold they terminate without value. Third, the most vital portion of r...
The economic theory of supply and demand dictates that an excess of supply (hotels) to demand (customers) leads to a lower price consumers are willing to pay. This creates inelasticity within hotel pricing and places substantial pressure on management to meet the pricing needs of customers while providing an attractive and unique service. Hotel services are also intangible in nature, placing increased burden on hotel owners to utilise all available rooms through discounts and deals.
This technique of raising or lowering prices based on the demand of the guest is something that airlines have been using for some time now. The first two airlines to use Revenue Management in 1985 were United and American Airlines. They used a series of algorithms to determine the best price to sell their seats (Desiraju & Shugan, 2000). The reason Revenue Management came about in the airline industry had to do with the airplanes only having a select amount of seats. Trying to sell all of the seats at the same price is very difficult to do especially when the airlines needed to at least be able to cover fixed operating expenses. A lot of times the planes would be left with empty seats, which, doesn’t help the airlines make any money. So by a...
There has been a direct finding that service recovery has a very strong correlation and positive relationship with customer satisfaction. This is an especially strong “wake-up” call for those in the hospitality industry to recognise that service recovery is a form of competitive strategy. Research by John Fleming and Jim Asplund indicates that engaged customers gives 1.7 times more revenue than disengaged customers and engaged customers returns a revenue gain of 3.4 times the average revenue (Brown 2007) . The understanding that future market share growth and profitability can be attributable to successful service recovery and customer satisfaction must implemented will future drive business strategies
even if it is the customer’s first use of a new hotel. When this is in
Amenities, location, packages, rates, special offers - just a few of the many factors that are considered when choosing the functions of a hotel. I was very curious to see how different types of hotels differ in what they offer, how they offer it, and where they offer it. These services are extremely significant because they are what define a hotel. They define what type of guests they are targeting, what type of hotel they want to be perceived as, and what level of service they want to deliver to their guests. The impression of the hotel left on the guest is essential for the success of the hotel. The idea of adding amenities to keep up with competition or getting creative with services offered is not new. The Journal of Retail & Leisure Property mentioned that starting in the 1970’s, “hotels and resorts tried to gain market share from their competitors by increasing amenities in the guest rooms.” The services and amenities have always been a factor when deciding what approach to take when trying to find the most success. By comparing an average 2-3 star hotel with a 5-star hotel, I was able to gain a better understanding of the different services offered in hotels and the different expectations that certain guests have in their stay.
The first situation is that of “special events” such as holiday periods, sporting/political events, etc. These events throw more power in the relationship to industry players due to the large customer demand and constrained supply. For example hotels see huge demand around the World Cup sporting event and hotel prices as a result on average spike between 100-300% compared to normal levels and for the last World Cup prices in one city went even further north of around 583% (Mallén, 2013). On the flip side, periods of economic recession have the opposite affect by impacting demand negatively thus forcing hotels to greatly lower prices to spur demand or compete with other industry players. During the last US recession, the average hotel occupancy rate dropped to a record low of 45% at one point from the normal average of 63%. As a result of the greatly declining revenues, such as a 48% drop by Marriott International, industry players laid off over 400,000 employees and greatly scaled back costs and new developments. Also importantly to customers who now saw more power in the relationship drift to their side during this time period, the average daily room price dropped to $98.18 (2009) from the record high of $107.42 pre-recession (2008). Both effects on opposing fulcrums show how important customer demand can affect the industry and the players’ actions
It has been proven to be one of the most effective management initiatives because it can combine the knowledge, ideas, feelings, feedback from many parties together, especially between an organization and its customers. If this strategy is utilized successfully, it can bring many benefits to businesses. One of the benefits is the development of innovative products. For hospitality industry, two of the main ways to use this strategy is by customer surveying and talking with related parties such as customers, suppliers, business
Rising number of complaints: overbooking the resort due to the communication problem between head office and the resort, and as a result the resort is understaffed and offering a low quality of service to the customer.
The Hotel industry has become very important in the past years due to immense traveling and growth of international business. Hotel industry not only plays an important role in the life of people but as well as the economy of the country. Development and advancement in the Hotel industry have rapidly been taking place and especially since the rapid change in technology, it is very important for hotels to be promptly keeping up to date. When the hotel industry is spoken of, there are many famous hotels but one hotel company that has been outstanding in growth and other aspects of business, like in Leadership, Teamwork (Employee turnover), Motivation (Customer retention and satisfaction, Goals and objectives, (changing the way hotel business has worked), and Change within the company; structurally inside and physically outside, adding elements, like entertainment, gaming, and outdoor activities, is the Hilton Hotel Company.